The Carter administration's new stepped-up campaign to head off a cut in capital gains taxes ran into heavy crossfire in Congress yesterday as members of a Senate Finance subcommittee assailed the President's attacks on the proposal as "demagoguing."
Led by Sen. John Danforth (R-Mo.), Democrats and Republicans on the panel lambasted both Carter's statement and a remark by Treasury Secretary W. Michael Blumenthal suggesting the measure should be dubbed the "Millionaire's Relief Act."
The beleaguered Blumenthal defended the administration's tactics, citing. Treasury figures showing 80 per cent of those benefitting from the measure would be in the $100,000-and-up brackets. "That's not demagogic," he insisted, "those are the facts."
However, panel members closed ranks behind Danforth, who chided Blumenthal at length about "the tone of the public debate" the administration had adopted. And Sen. Bob Packwood (R-Ore.) said of Carter's attack: "That is the statement of a demagogue."
The subcommittee's reception appeared to confirm earlier indications that the administration may be facing an uphill fight on the issue. The bill to cut capital gains taxes, sponsored by Rep. William A. Steiger (R-Wis.), has broad support both in the House and Senate.
Carter attacked the measure in a press conference on Monday, contending it would provide "huge windfalls for millionaires and two bits for the average American." He warned he would veto the Steiger bill if it were enacted, even as part of a broad tax-cut proposal.
Apart from the assertion that the measure was "a millionaire's bill," Blumenthal's testimony yesterday comprised a lengthy dissertation on which income brackets would receive the greatest benefits from the Steiger bill and refutation of arguments that it would benefit homesellers.
The statistics showed some 3,000 of the beneficiaries of such a tax cut would be millionaires, who would receive tax breaks averaging between $145,000 and $214,000. By contrast, Bluementhal said the average tax break the bill would give those in the $20,000-$30,000 bracks would be $1.
The Secretary's testimony came amid a battery of witnesses, including Steiger, who spoke in favor of the bill. Harold M. Williams, whom Carter recently appointed chairman of the Securities and Exchange Commission, endorsed the Steiger measure as a spur to stock market investment.
It was clear from the questioning that the subcommittee members were, to a man, strongly in favor of the Steiger provision. Danforth told Blumenthal that Steiger's own arguments earlier "have just run circles around" the administration's presentation.
And Sen. Harry F. Byrd Jr., (I-Va.), chairman of the panel, dismissed Blumenthal's criticisms about the benefits going to upper-income taxpayers by noting that of the tax breaks from the investment tax credit for business, "more than a third goes to 45 big corporations."
It was not immediately clear why the panel chose to hold its hearing now, except possibly to promote the Steiger measure. The bill still is pending in the House Ways and Means Committee as part of a broader tax-cut proposal, and isn't expected to reach the Senate until late summer.
However, several observers suggested that Carter inadvertently may have helped to heighten the attention the hearing received yesterday by attacking the capital gains bill personally in his press conference Monday. "Until then, one official conceded, "it was just another hearing."
Steiger's measure would trim the maximum tax rate paid on capital gains to 25 percent, from the 49.1 per cent rate now paid by a handful of very high-income taxpayers. The Ways and Means Committee now its considering a compromise by Rep. James R. Jones (D-Okla.) providing half that cut.
The Steiger bill would roll back tax increases on capital gains enacted as part of the tax reform bills of 1969 and 1976. Capital gains are the profits from the sale of stocks or other assets, and are taxed at what amounts to half the rate of ordinary income.